Pakistan’s Telecom Industry is in Deep Trouble!

Deep inside all the hustle and bustle, glittering stats, assertions about one of the fastest growing 3G and 4G markets in the world and millions of new subscriptions every month, the telecom sector of Pakistan — in reality — is in deep trouble.

This is something that no one is going to tell you in their keynote speeches, glowing ads or the rosy official statements but the fact is that cellular mobile operators in Pakistan are undergoing one of the toughest times since the beginning of industry in Pakistan more than two decades ago.

For the record, we have raised alerts about this situation before, but as a reminder and to make the regulators realize the severity of the situation, here are some facts that policy makers needs to look at carefully, grasp and then hopefully take some action to address.

  • Cellular Revenues
  • Data Revenues:
    • Data Users almost doubled in last one year
      • 3G, 4G users on June 2015: 14 million
      • 3G, 4G Users on June 2016: 29.3 million
    • Data Usage grew 350% during last one year
      • 3G, 4G bandwidth usage in June 2015: 12,443 terabytes per month
      • 3G, 4G bandwidth usage in June 2016: 39,821 terabytes per month
    • Data Revenues, however, grew only 26%
      • Data Revenue in 2014-15: Rs. 77.94 billion
      • Data Revenue in 2015-16: Rs. 98.82 billion
  • Average Revenue Per MB Usage declined 54% during just one year
    • 2014-15: $0.55 per MB
    • 2015-16: $0.20 per MB
  •  Average Revenue Per Minute for all national and international traffic in Pakistan has gone down from Rs. 1.68 in 2010-11 to just Rs. 0.60 in 2015-16.

cellular_voice_revenue_per_minute

Source: PTA

Just in case if you don’t know, Pakistan’s Average Revenue Per User per month is hovering around at just Rs. 200 per month and that’s below than telecom ARPUs of 233 nations around the world, i.e. one of the lowest in the world.

Then there are taxes. Telecom sector is most taxed sector in Pakistan, i.e. no other sector (except one or two) is more taxed then telecom. This further dents the revenues of mobile phone companies as mobile subscribers — 90% of whom are not rich — spend low due higher tax deductions.

The Outcome

Other than China Mobile, all telecom groups operating in Pakistan (Telenor, VimpelCom, Etisalat) have telecom operations in at least dozen other markets.

When our Pakistani operators go back to their respective headquarters to ask for more investment, their bosses look at various things before issuing any capital. One key thing they look at is ROI or return on investment.

So for example, if Telenor has $1 billion in plans for additional investments across all markets in one calendar year, it will evaluate its ROI for different markets to potentially see where this investment will return the most in terms of revenues.

In such cases, Telenor’s global headquarter will look at stats that we have shown above. Then there’s a comparison made between different markets and possible returns.

To give you an idea, average revenue per minute across different Asian markets where Telenor operates is as following:

  • Malaysia: $0.069
  • Thailand: $0.019
  • Bangladesh: $0.007
  • Pakistan: $0.005

Obviously there are other things that are kept in mind as well, such as political and economic stability of a market, growth trends, teledensity, future prospects and others, but that’s also where Pakistan is usually struggling and the outcome is: Lowest priority among all markets for further investments.

This is why you see following

  • Outsourced operations
  • Job insecurity
  • Increased employee targets, lower benefits
  • late vendor payments
  • Slow network expansion
  • Decreased network quality (as networks are allowed to reach beyond capacity before new deployments)

It’s a dire situation all around and we need to fix it before its too late as we are fast heading towards the point of no return.

Telecom operators and regulators need to think now and act fast.

Note: In next part of this multi-part series we will explore our options of fixing the situation — without hurting the customers.

Tech reporter with over 10 years of experience, founder of ProPakistani.PK


  • Market competition brings the prices down and it is an not an unusual phenomenon. Telenor and Zong have been quite successful in grabbing market share from ufone, warid and mobilink. The problem lies in the fact that most of the mobile operators are relying on lower value added services (voice and sms) only.

  • Hazrat Pir Maulana Allama Bangali Najoomi AAMIR ATTA, do you have any idea of Business cycle, every rise has a fall then recovery and then boom and same goes on.

    But the matter is of EVOLUTION, if companies are reluctant to evolution they vanishes.

    what is the big deal here, why are you so much touchy about their revenues, seems you have been injected to CRY on social media. if they have issues in competition then go the CCP, if they have issues in operational costs then they are smart enough to tackle with them.

    Did you every think about TYPE WRITER making companies, what happen to them? are they living or dead. do you have same sympathy for them. what are they doing now?

  • Kmal kart ho ap bhi, 348Rs billions yearly pakistan se bahir ja rahy hein or ap kehty ho ke revenue Kam hai. Pakistan ke apny telecom operator hony chahiye take ke pesa apny Watan mein rehy.

      • Dear aamir can you confirm that all NGMS licenses auctioned in 2014 were technology neutral or not. Because on FAB website only NGMS are mentioned with them not GSM like previous 2G spectrums. I also read at some places before auction that upcoming NGMS will be technology neutral. Could 2100 MHz frequency also be used for LTE band 1 instead off 3G? Please confirm.

          • Than Telenor’s move to go for 5 MHz of 850 MHz for LTE and 5 MHz of 2100 MHz and 850 MHz for 3G is a very bad move. They should have gone for full 850 MHz for 3G and refarm their 2100 MHz for LTE band 1. With this move their problem to get Band 5 LTE handsets could have been solved as all old n new 4G phones in Pakistan does support LTE band 1 and all 3G phones supports 850 MHz as well. With 2100 MHz LTE Telenor could have more capacity to its 4G network than 850 MHz one.

            • If they follow your proposal, then their capital investments in 2100 MHz for 3G in the infrastructure may be wasted partially if not wholly.

              • Kabhi kabhi barray nuqsaan se bachne k liye chotay nuqsaan karne parrtay hyn. Telenor ko 1st auction myn just 5 MHz 3G aur 4G ke liye na jaane ki saza mill rahi hay.

            • Its not like that, only 15 to 20% of the phones are capable of supporting 850Mhz i.e (High end phones) whereas almost all the phones support 2100MHz band . so it is very sensible if you put 3G on 2100Mhz and grasp maximum of the market customer beacause of 3G usability,availability and cheap rates rather than to put LTE on 2100 which has limited number of customers, inadequate coverage and comparatively higher rates.

              • Almost all phones in Pakistan supports 850 MHz 3G and Telenor is even currently using its 5 MHz of 850 MHz for 3G. And Telenor can use carrier aggregation for LTE with 5 MHz each of 850 and 2100 MHz which give them speed as well as coverage.

        • They are technology neutral and FAB is carving european 700 band and 2100 also for future availability.

          • 700 is being used under Miltary operations. 2100 MHz is available with 1900 MHz uplinking frequency. Which could have been used as LTE band 1 with support of almost all 4G phones in market.

      • So an article published clearly based on political affiliation. Thats make this article useless.

        If telecom is really in deep trouble then i hope all the Cxx will cut off at least 75% of their pkg.

      • Bunda lalai Jutti…….matlub, what it has to “who will buy properties on foreign lands than” with the article above.

        Meray Bhai yeh article aap ney Zabardasti to nahin likha.

  • It would have been better to evaluate the income of telcos..not the revenues
    because income shows the real growth in capital and ROI
    If the income segments is increasing, then everything else is secondary

  • Dear Aamir Partially agree to you.
    But I will accuse Telenor for their approach. They kept bound their huge investment in Vimplecom without any reason. Companies have to explore new segments for income. And Telenor had that opportunity at the time of NGMS auction. Among India, Bangladesh and Pakistan, Telenor was most successful in Pakistan at that time and was near to cross Mobilink to become top operator of the country. But they mosjudged Pakistani market and went only for 5 MHz 3G only spectrum when No. 4 operator Zong (at that time) went ahead with 10 MHz of 3G and 4G each. And Telenor could have invest too in both 3G and 4G with its Vimplecom investment. And Look now Zong is real threat for Mobilink’s top position and gearing up to cross Telenor in couple of years. Opportunities do not knock everyday. And Telenor has lost its opportunity, and their desperate move for 850 MHz Pathetic 4G spectrum doesn’t make difference now.
    NGMS was Android and Telenor behaved like Nokia. Simple is that

    • Telenor did not misjudge the situation. They must have known of the opportunity. I would say they delayed it on purpose because they are more interested in milking existing technology and infrastructure instead of offering new technologies and better service to customers. Telenor was greedy and played safe, now their customer base is smaller and their signal quality is terrible. Zong instead focused on providing better service to customers. So customers obviously moved to Zong which has very good signal quality and internet speeds.

      As long as Telenor sticks with their mindset of being cheap and not offering newer services/infrastructure they will continue to provide their shit quality and lose customers to competitors.

      • Telenor cannot milk customers over voice and text services much longer. Future belongs to Data services. It just a matter of 2 years when every one will have a 4G smartphone and launching VoLTE at that time by Zong and Mobilink will snatch more customers from Telenor. By going only 5 MHz for 4G is their worst move after acquiring worst LTE 850 MHz spectrum.

  • As a matter of fact and through my first hand experience, Amir plays in the hands of telco operators to spread the agenda of telcos in pakistan. While during the ngms auction consultancy project, he had been fed by ufone’s regulatory director and his team to leak the info and fabricate the facts and discussion. Telco is ij trouble thats why telenor bought a spectrum and investing billions for upgrading its infrastructure. Pls get a life!!

    • The inside information leaked about 3G auction was from a photograph that ministry of IT shared by mistake, and a slide on projector had everything in it.

      But that’s okay, I understand your concerns.

        • The cry baby must have left now. A senseless banter supported by squat as facts. Anyway, PP is the only professional blog Pakistan has ever had, and actually, it shall always be alone. Others are just hitlers and their mods are monkeys with matchsticks. They dont tolerate discerning opinion, let alone objections/criticism.
          More power to Propakistani and the man making it happen every day. Middle finger for the rest.

          • Lol! Banter!! You know nothing baby! Not a single thing. How conversations of consultants in naveed butt’s office being copied by PP with fabricated and twisted words, was a biggest surprise. Im not just commenting here for the sake of it as you are doing, I was the project manager of that project, son.

    • No operator is really investing billions any more. U need to re-look up on the investment volumes done by telco lately. The newly added data customers, is infact the ex-voice customer. The investments done in 3g and 4g are helping improve the customer journey but not helping the operators make more money. There is no doubt that top line of these operators is still growing to some extend but bottom line is definitely not.

  • Telcos themselves are to be blamed for low ARPU. There is no other factor. Taxes are not hindering growth. You can clearly see increase in number of subscribers plus increase in usage for voice, sms and data. Yet revenue per call, sms and MB is down.

  • The Problem with Pakistani Telecom Market is of its own making in many ways.
    1. No concept of sharing assets . ( Your Article picture shows the true problem).
    2. Always depended on Foreign players. (Why cannot we have our own players (its a service not a business where 30+% is taken away).
    3. Pakistani are weak Managers.. most of C level cannot get anywhere near to the international standards… in competence resulting in more money spend on not so good deals… (Shady too).
    4. OTT will kill the Operators business .. It is just the matter of time… .
    5. Operators themselves went to in a price war.. (shot themselves in the foot).
    6. Operators have made money but look at them . they want over 30% profit… (Those days are gone !)
    7. Look at India.. (You gave the example of India.. They have their own companies… Telenor is struggling there).
    8. Operators model need to change.. ROI is the same for each of them.. if you do not invest you will die….its just a matter of time…..

  • GSM is an outdated technology. Data lets you do everything GSM can and much more. With soundcloud replacing cassettes and youtube replacing cable, people will continue to adopt newer technologies. Resolutions going from 480p to 1080 further pushes the data volumes.

    The solution is simply to move away from charging by minutes or mb and to start charging for OTT services while providing data and volume for only a nominal rate. However Telco bosses want to maintain the status quo instead of embracing the future. They will continue to milk the current GSM systems instead of offering newer and better services. Expect to see higher fees and hidden costs in future.

  • Kindly correct 2 things.

    3G, 4G users on June 2015: 14 million
    3G, 4G Users on June 2015: 29.3 million

    2nd information would surely for year 2016. Same thing here too.

    2015-15: $0.20 per MB

    Thank you.

  • Yes i agreed with you in terms of taxes but You always compered the telco in other market in weak deportment but forget the other countries internet speed, signals strenth, employees salaries and availability of facilities to backward areas, if possible compere it in these departments also.

  • Disappointed to read this article. Although pro Pakistani reports good and Is usually unbiased, I think I am not the only one to sense some bias towards Telcos.

    Factoring everything on earth won’t make any business profitable. Dollar value and rupee depreciation (which didn’t occur) is the same point, just used different words to sound substantial. Plus local inflation should not be taken onto account if u r converting things in dollars.
    I wonder what are the ‘other corresponding factors’ the author factored in.

    No wonder increasing compliance costs and competition, high taxes on investments etc are slowing growth in Telcos, but the real determinant is the profit these Telcos are juicing up from the markets which would give better picture whether they are really in trouble or just lobbying to get more incentives.

  • Where r u getting ur numbers from? Either the per user revenue is too less or the number of users figure has been inflated. 200 is what peons and drivers around me use, net of taxes.

  • This is a fact telecom operators are struggling. See Warid, merged/acquired by Mobilink. Ufone might be surviving due to PTCL/Etisalat. Telenor, Zong, Mobilink maybe surviving due to very strong backing by the multinational groups.
    But see what has happened here. We have the lowest ARPU and highest of the taxes and now we are having only cheap chinese vendors in the market which are not good with our local sub-vendors and local service providers. In total, it is resulting in cost cutting where people are getting fired while talented individuals are forced to leave the country to seek better jobs abroad.

  • 1.Pakistan does not charge for sms, facetime, whatsapp etc etc. If even Rs 0.1 per minute is charged, Pakistan can earn about Rs 1 billion per day.
    2. Once CPEC and RPEC(Russia Pakistan Economic Corridor) starts functioning and OFC is connected to (India ?), Afghanistan, Iran, CAS, Russia, Oman, Dubai, Africa and China; Pakistan will start earning about 60 b US $ per year.
    3. No worry.

  • How can you say revenues are negative when economic indicators are considered, Where is the pricing department then? this is not science that you give arguments in isolation and proving your point. Pricing is done always in a way that the company grows, and all these economic factors are considered while pricing is done. Your assumption is incorrect. All the business cycles and product life cycles are planned keeping these indicators in mind. Plus the dynamics are misstated, can you please show the trend of revenues from the advent of GSM mobile technology in Pakistan till date, you will realize that the technological shift has occurred with the changing needs of the market. Voice is now saturated and new market preparation is needed, this is the time to divest from old tech and invest in new one. I am disappointed with this misleading piece of text, just by merely saying that its negative doesn’t mean that it is in actual. Your own graph (source PTA) of revenue per minute it clearly shows that the market is shrinking due to the shift in dynamics, technology, usage, perceptions and everything. Why you excluded Zong, how are they not suffering from this effect? I request you to kindly show the entire trend from 2000 till 2015-16 for average revenue for Pakistan market, and everyone will get the answer. Moreover, you might be comparing revenue per minute for different technologies, this is again not an apple to apple compare. Furthermore, “decrease in the voice revenue for the current technology” is might be due to the other software available for voice communication. Hence, there must be a shift in of voice traffic from medium to another, with the growing cellular phone industry, growing population how come voice traffic can decrease? (please read this http://www.pas.org.pk/smart-phone-usage-in-pakistan-infographics/) i request you to please provide a holistic view with proper reasoning. I wish you good luck!

    • there are many factors in pricing … you cannot standout of of the environment and price your product … may be now the competition is so fierce that they are having a difficulty in maintaining healthy profits !

  • While making a comparison of average revenue per minute you are making one mistake that you are ignoring the population factor … pakistan’s population is 4 and 6 times larger than compared to thailand and malaysia. even if they are earning less per minute they have the advantage of volume in Pakistan. And if your multiply this revenue with a factor of 4 in the case of thailand as thailand has a population of only 50 million and we have a population of 200 million then the total revenue gained from pakistan actually becomes equal to thailand.

    • Yes, because of the fierce competition they are having a little difficulty in having healthy profits but that is the reason which will make them into new profitable sectors e.g. mobile and digital banking, other value added services etc. that’s how capitalism works !
      Now the telecom market is quite saturated. Telenor is earning more money from its easy paisa operations than its cellular network !

  • What about people – their customers?.. the loss indicated by the writer is actually a decrease in profit margin. What is the big deal. The telco operators in Pakistan have acted maliciously as far as serving customers is concerned. They have made huge profits while not givings us the international quality; be it voice quality, data or connectivity.

  • This article looks to show that telenor has problems in investment. The mechanism explained in this article is basics how group telecom operators operates but the group companies definitely thinks in long term peerspextive as well. Just look at recent investment of telenor group for acquisition of additional spectrum for 4G within this tough times. Further, telenor is a company who has modernized whole network who is very much difficult to think even.
    From my 20 years experience of telenor experience within Pakistan and other markets, this article is nothing other than talking bad about telenor.
    You must grow up man and share the true picture of Pakistan telecom market so we should be able to attract more investors in Pakistan.

  • felling sorry for the writer, he has explained very nicely of thr current issues of the industry but people are stuck in telenor rpu, guys all of our telcos have thr lowest RPU in the world. this is due to the price war which should have been interveened by PTA but they never did, what is resulting now a days due to this is that there is little or no spending. compromise on quality , all work being outsourced with telecom engineers having years of experience being treated like labors having contracts as short as 3 months. with no job security no health benifits what so ever. and the investers dont want to spend a dime in all the operators which results in lower vendor cost results in cheaper quality less features results in less resource requirments results in (more people available for job) results in less pay. the imdustry is really in trouble . govt taxation should be relaxed.

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